In re Disciplinary Proceeding against Haley

Page 1262

126 P.3d 1262

156 Wn.2d 324

In the Matter of the DISCIPLINARY PROCEEDING AGAINST Jeffrey T. HALEY, Attorney at Law.

No. 200,153-0.

Supreme Court of Washington.

Argued May 10, 2005.

Decided January 26, 2006.

Jeffrey Thornton Haley, Bellevue, for Petitioner/Appellant.

Randy Von Beitel, Washington State Bar Assc, Seattle, for Appellee/Respondent.

En Banc.

OWENS, J.

¶ 1 Attorney Jeffrey T. Haley appeals the recommendation of the Disciplinary Board of the Washington State Bar Association (Board) that he serve two six-month suspensions pursuant to counts 2 and 3 of his disciplinary proceedings. Regarding count 2, the Board determined that Haley was subject to a six-month suspension for knowingly violating RPC 4.2(a), which provides that, "[i]n representing a client, a lawyer shall not communicate . . . with a party . . . represented by another lawyer." The Board concluded as to count 3 that Haley was subject to a six-month suspension for knowingly violating RPC 1.7, which prohibits a lawyer from representing a client if the representation is "directly adverse to another client" or "may be materially limited by . . . the lawyer's own interests." RPC 1.7(a), (b). The Board recommended allowing Haley to serve the two six-month suspensions concurrently. The Washington State Bar Association (WSBA) agrees that two six-month suspensions are appropriate but maintains that the suspensions should run consecutively.

¶ 2 Although we hold that, under RPC 4.2(a), a lawyer acting pro se is prohibited from contacting a party represented by counsel in the matter, we apply our interpretation of RPC 4.2(a) prospectively only and dismiss the violation alleged in count 2. We agree that the presumptive sanction for Haley's knowing violation of RPC 1.7 is a suspension, but we conclude that a departure from the Board's recommendation is warranted, particularly in light of the considerable delay in reporting and prosecuting the misconduct. For Haley's violation of RPC 1.7, we therefore impose a reprimand.

FACTS

¶ 3 Counts 2 and 3 of the WSBA's complaint against Haley arose out of separate sets of events that occurred in 1996-1997 and 1988-1991, respectively. Haley does not challenge any finding of fact as made by the hearing examiner or adopted by the Board. Accordingly, such facts are considered verities on appeal to this court. In re Disciplinary Proceeding Against Brothers, 149 Wash.2d 575, 582, 70 P.3d 940 (2003).¹

¶ 4 Count 2. In 1994, Haley filed a lawsuit against Carl Highland, the former chief executive officer of a defunct closely held corporation, Coresoft, of which Haley was formerly a shareholder and board member. Initially, Haley acted pro se in the matter but hired counsel when the case went to trial in November 1995. After the trial ended, Haley's counsel filed notice of withdrawal and Haley reverted to pro se status as to appeal and collection issues. Highland was represented by various attorneys at all times during this matter, and Haley knew that Highland was consistently represented by counsel.

¶ 5 The hearing officer and Board concluded that Haley's improper contact with a represented party arose out of two incidents. First, while Haley was acting pro se after the trial, he sent a letter to Highland and his wife proposing settlement. The letter was dated September 9, 1996, and stated in full as follows:

"I am about to spend approximately $25,000 on costs and attorneys fees for the appeal. If the appeal is successful, the personal earnings of both Ronda Hull and Carl Highland will be subject to garnishment to satisfy my judgment and the judgment now held by Carl Highland will be overruled. Also, the amount I am about the [sic] spend on costs and attorneys fees will be added to the judgment.

"This is the last opportunity to settle the case before I spend the money on the appeal. This settlement offer will not be open after this week and may be withdrawn at any time if it is not promptly accepted. I am offering that all claims and judgments between the parties be releases [sic] with no payments. Please respond directly to me."

Decision Papers (DP) at 38. Highland forwarded the letter to his attorney who, in turn, suggested to Haley that the letter constituted a violation of RPC 4.2(a) and warned him not to have any further contact with Highland. Second, on January 31, 1997, Haley again contacted Highland, this time by telephone. Haley left the following voice message on Highland's phone:

"Carl, this is Jeff Haley . . . .

"I hope your attorneys have told you . . . Jim Bates decided that your judgment against me is collectable only from my separate assets and I have none; they're all community assets. And, therefore, your judgment is uncollectable [sic]. And the chance for appeal of that determination by Jim Bates has run so you can't appeal it . . . so that if the appeal proceeds my position can only improve and yours can only get worse and if you have nothing collectable . . . there's no chance of ever getting anything collectable. It seems to me that we ought to settle this case and if we do so Monday . . . there'll be an opportunity on Monday to do so if you're interested. Give me a call."

DP at 41.

¶ 6 In his "Amended Findings of Fact and Conclusions of Law," the hearing officer stated that Haley's letter and phone message were "clearly prohibit[ed]" by RPC 4.2(a), DP at 46, but he acknowledged that there was some authority supporting Haley's position that attorneys acting pro se are not subject to the prohibition. DP at 46-47. Ultimately, in his "Additional Findings of Fact, Application of Standards, and Recommendation," the hearing officer determined that, "because of the specific language of RPC 4.2 (i.e., `In representing a client . . . .') and because of the apparent absence of authority within the state of Washington on this specific issue, Mr. Haley could have harbored a sincere belief that contacts with a represented opposing party were not prohibited." DP at 63. Consequently, the hearing officer concluded that the violation was "negligent" and that the presumptive sanction was thus a reprimand. Id. (citing ABA, Standards for Imposing Lawyer Sanctions std. 6.33 (1991 & Supp.1992) (ABA Standards)).

¶ 7 Deleting the hearing officer's conclusion that Haley's violation was negligent, the Board substituted its contrary determination that "Haley's mental state was knowledge" and that the presumptive sanction was therefore a suspension. DP at 7 (citing ABA Standards std. 6.32). In doing so, the Board took note that Haley knew Highland was represented by counsel at all times and stated that a "reasonable reading of RPC 4.2 prohibits a lawyer, while representing him[self] or herself, from contacting a represented party." DP at 7-8. The Board also faulted Haley for not "taking time to determine whether his conduct was an ethical violation." DP at 8.

¶ 8 Count 3. In 1988, Haley and four other individuals formed Coresoft, a Washington corporation in the software development business. The four other shareholder/directors were Nicholas Corff, Donald Padleford, Randolph Cerf, and Bruce Haley. In addition to being a shareholder, board member, and secretary of Coresoft, Haley also served as the principal lawyer for the company.

¶ 9 In raising capital for Coresoft, the corporation obtained a $75,000 line of credit directly from Key Bank, which was personally guaranteed by the Coresoft shareholder/directors. This credit was properly secured with a security agreement and UCC-1 financing statement, see chapter 62A.9A RCW, and, as a result, Key Bank maintained a first priority security interest in Coresoft's assets. Additional capital was obtained in the form of $40,000 loaned to Coresoft by Haley in 1988, the funds for which Haley obtained via personal loan. Haley obtained a promissory note from Coresoft and a signed UCC-1 financing statement as part of the loan transaction. However, there was no separate security agreement securing the note, and the UCC-1 financing statement was not filed until October 1990.² Haley's purported security interest had second priority behind Key Bank's interest.

¶ 10 In late 1990, the Coresoft board of directors came to realize that the company's financial viability was hopeless. The board concluded that the best option was to form another corporation that would purchase Coresoft's assets for an amount at least covering the $75,000 from Key Bank and, thereby, discharge all personal liability they had individually incurred by guaranteeing the line of credit. With the agreement or acquiescence of the board, Haley undertook the following course of action: (1) Haley formed a new corporation, known as Star Software, for the purpose of purchasing Coresoft's assets while leaving as many liabilities as possible behind;³ (2) Haley conducted a foreclosure sale on Coresoft's assets, which he appeared to be in a position to do as a second priority security interest holder; and (3) acting as Star Software's attorney, the only bidder at the sale, Haley purchased Coresoft's assets for an amount that covered both Key Bank's $75,000 and the $26,000 remaining due on Haley's $40,000 loan to Coresoft. Coresoft became defunct on February 1, 1991.

¶ 11 Haley concedes that conflicts of interest arose out of this series of events. Specifically, Haley's duty to Coresoft and its shareholders conflicted with his interests in recovering on his personal loan and in moving Coresoft's assets to his new client, Star Software, at the lowest possible price. The hearing officer found that Haley made certain that Star Software took on only those assets and liabilities beneficial to the new company, including foreclosing on assets not covered by his UCC-1 financing statement. The hearing officer also found Haley's actions harmful or potentially harmful to Coresoft and its shareholders. While the Coresoft board members agreed to the formation of Star Software and the foreclosure sale, Haley did not...